The factors that control the chemoselectivity of palladium-catalyzed cyclization reactions of (2-iodoanilino)carbonyl compounds have been explored by an extensive experimental computational (DFT) study. It was found that the selectivity of the process, that is, the formation of fused six- versus five-membered rings, can be controlled by the proper selection of the initial reactant, reaction conditions, and additives. Thus, esters or amides produce ketones by a nucleophilic addition process, whereas the addition of PhO− ions leads to the formation of indolines by an α-arylation reaction. In contrast, the corresponding ketone reactants yield a mixture of both reaction products, the ratio of which depends on the base used, in the presence of phenol. The outcome of the processes can be explained by the formation of a common four-membered palladacycle intermediate from which the competitive nucleophilic addition and α-arylation reactions occur. The remarkable effect of phenol in the process, which makes the α-arylation reaction easier, favored the formation of enol complexes, which are stabilized by an intramolecular hydrogen bond between the hydroxy group of the enol moiety and the oxygen atom of the phenoxy ligand. Moreover, the chemoselectivy of the process can be also controlled by the addition of bidendate ligands that lead to the almost exclusive formation of indoles at expenses of the corresponding alcohols.